With increasing globalisation, the accounting profession is grappling with the problem of how to standardise accounting norms across the world and who should change what to bring about the harmony.
This problem engaged the attention of experts at a conference of International Federation of Accountants that is being held here. Its theme: `Role of the Profession in the New Mileu'.
Delivering the keynote address, Mr Fermin Del Valle, President, IFAC, called upon India to "achieve full convergence with International Financial Reporting Standards (IFRS).
While recognising that this was a "substantial undertaking", Mr Del Valle said, "full convergence is a desirable situation and investors and users of financial statements would benefit greatly from harmony in accounting standards across the globe."
Mr T.N. Manoharan, President, Institute of Chartered Accountants of India (ICAI), said that India was already almost fully harmonised with IFRS.
Indeed, India has been "adapting" international accounting standards. Only in a few areas did the Indian standards differ from IFRS. There again, IFRS could, in some cases, change its standards on par with India or India could change its own.
Giving examples of the few areas where India and IFRS differed, Mr Manoharan said that Indian companies had to, by law, charge a specified minimum depreciation to its profits, while the international practice was to let the companies decide on the rates of depreciation depending upon the economic value of the asset.
Another example, India treats redeemable preference shares as part of capital, whereas elsewhere in the world it is debt.
He said that ICAI was actively in dialogue with the International Accounting Standards Board, which sets the IFRS. The head of IASB, Sir David Tweedy, is scheduled to visit India in February to take the discussions forward.
In order to achieving complete harmony with IFRS, the institute has formulated a committee to first identify the case and issues in convergence and then to prepare a road map towards it.
He said that while there was much commonality between Indian standards and IFRS, the latter differed greatly with the US GAAP.
However, internationally, IFRS was gaining more acceptance over US GAAP, Mr Manoharan said, noting that today over half the Fortune 500 companies adopted IFRS than US GAAP indicating IFRS' growing popularity. Over 102 countries in the world have adopted IFRS, he added.
Mr S. Gurumurthy, a chartered accountant and Convenor, Swadeshi Jagran Manch, said at the conference that Indian chartered accounting firms had to compete with international firms carrying the burden of the "disciplined demanded of us".
Pointing out that the telecom industry in the US grew only after the telecom giant, AT&T, was split into many companies, Mr Gurumurthy said that the Big Four (KPMG, Ernst & Young, PWC and Deloitte Haskins & Sells) should be split into 10-12 smaller firms.
He said that global auditing system "tends to monopolise" and the Indian accounting practice was getting linked to the global system.
Earlier, the President of CII, Mr R. Seshasayee, called for setting up of a body that will bridge the gap between civil society and corporates. Such a body could arise out of an existing regulatory body.
He said corporate governance could be effective only if there existed a dialogue between civil society and corporates. "The public are stakeholders of any company and have a right to know if some decisions by the company's management would affect them. Often private companies do not share such information," he said.
Mr Seshasayee also spoke about transparency being key to corporate governance. However, disclosing more information does not imply greater transparency, he said. "Bad information is often buried in the bulk of disclosures and can miss the public eye. What we need is selective and exceptional disclosures," he said.
Mr S. Mahalingam, Chief Financial Officer, Tata Consultancy Services (TCS), said corporate governance practices in India were yet to mature. He cited the need for evolved models on risk management and remuneration by sharing some procedures adopted by TCS.